Release: 4850-03 (Civ-H-03-3526)
For Release: October 7, 2003


U.S. Commodity Futures Trading Commission Charges Richard A. Hale and Allegheny Gulf Investments, Inc., with Misuse of Investor Funds

WASHINGTON, D.C. -- The U.S. Commodity Futures Trading Commission (CFTC) announced today the filing of an enforcement action in federal court in Texas against Richard A. Hale (Hale) of Kingwood, Texas, and Allegheny Gulf Investments Inc. (Allegheny) of Corpus Christi, Texas.

The complaint, filed on September 30, 2003, in the U.S. District Court for the Southern District of Texas, charges Hale and Allegheny with misappropriating customers’ funds to cover Allegheny’s trading losses and failing to inform three customers that their trading accounts would be cross-margined with Allegheny’s master trading account. According to the complaint, the defendants’ misappropriation and omissions of material fact caused two of the customers to lose approximately $1 million, when the funds in their accounts were used to cover a deficit in Allegheny’s master account caused by Hale’s trading losses.

The CFTC complaint specifically alleges that, between approximately November 1998 and January 1999, Allegheny entered into three separate joint trading agreements with three customers for the purpose of trading natural gas futures and options on futures contracts. Hale allegedly directed the trading in each of the three joint trading accounts as well as Allegheny’s master account. As charged, each of the three separate joint trading accounts was established a sub-account of the Allegheny master account. The complaint further alleges that the defendants failed to inform the three customers that their accounts were cross-margined with Allegheny’s master account. As a result, between July 1999 and October 1999, Hale allegedly traded the Allegheny master account into a deficit of approximately $2 million, causing two of the customers to lose approximately $1 million of their investment to cover the losses incurred in the Allegheny master account. The complaint charges that these actions constitute fraud and misappropriation in violation of the Commodity Exchange Act.

In its continuing litigation, the CFTC is seeking injunctive relief, repayment to customers, payment of ill-gotten gains, and monetary penalties.

The following CFTC Division of Enforcement staff members are responsible for this case: Eugene Smith, Rick Glaser, Charlotte Ohlmiller, Kay Majors-Guy, and Paul Hayeck.
A copy of the CFTC complaint may be obtained at www.

CFTC Division of Enforcement Media Contact on this Case:
Paul G. Hayeck, Associate Director
CFTC Division of Enforcement, (202) 418-5312

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